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How Online Startups can Build Audiences on the Cheap March 14, 2011

Posted by David Card in Uncategorized.
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Last week, prominent investors declared in blog posts that two marketing tactics favored by many startups — search engine optimization and viral promotion via Facebook — were no longer viable. The real truth is that both remain effective but neither is free, and never was. So let’s examine how a startup making consumer apps or online services can get that much-coveted first million or two users as cheaply as possible.

Investor and Hunch co-founder Chris Dixon said he hasn’t seen any startups build a business through SEO since 2008. He reasons that Google’s ranking algorithm favors older sites with lots of links links. That is fostering an arms race between Google and the “black-hat” optimizers that build link farms and the content farms that create highly optimized but lightweight content.

Building off Dixon’s argument, Bessemer Venture Partners’ Sarah Tavel said she thought Facebook could still act as a startup’s primary free marketing channel, but that its efficacy had been severely diminished. Facebook is over-crowded with apps, she thinks, and is exerting more control over the viral amplification social gaming companies like Zynga used so effectively.

SEO, Facebook Never Free, Still Effective

SEO never was free. Big companies spend thousands of dollars on optimization tools (e.g., BrightEdge, Covario, SEOmoz, Yield Software) and search specialist agencies like iCrossing and 360i. These tools and services help companies with tagging and linking, and making their content and apps more discoverable and indexable by search engines. But more importantly, SEO still works.

Search guru Danny Sullivan advises multiple marketing tactics, and says he sees SEO working for plenty of companies. His own relatively new content site gets 20 percent to 40 percent of its traffic from search. Q&A sites like Quora and Stack Overflow have grown primarily through search and word of mouth. In this interview, Stack CEO Joel Spolsky concedes his sites’ user interface is so bad he depends on Google as his front end. SEO should remain a major marketing tactic for any startup.

Likewise, while it’s true that Facebook has clamped down on free promotions — game status updates only appear in other gamers’ feeds — the biggest Facebook success story wasn’t built on free viral tactics. Social commerce giant Groupon’s president Rob Solomon told me in an interview that Groupon didn’t do much SEO. It bought some paid listings and display ads from Google, but most of its marketing budget went for Facebook advertising. Groupon only did TV ads after it got to 50 million users.

At the same time, Inside Facebook wonders if Facebook might relax some of its viral restrictions, now that its games-driven Credits virtual currency business is starting to mature. It has already opened up Credits promotions. Along with SEO, most consumer startups should continue to use Facebook, but expect to spend some marketing dollars there.

Other Tactics for Audience Building

Getting that first million users that advertisers demand isn’t going to come for free, but it doesn’t have to be that expensive. Build marketing programs around the following:

  • Multichannel campaigns: Most ad inventory is still cheap at sub-50-cent CPMs. Facebook is building out free analytics tools to help plan marketing across offers, ads, Likes and Comments.
  • Flexible SEO: Google’s “panda” algorithm (upgrade affected more sites than usual. Here is some advice on how to react to the changes.
  • Lead generation: It’s a little sketchy, but you can still buy Facebook friends and Likes from companies like GetMorePopular.com and uSocial.
  • Other social networks: MySpace inventory is even cheaper than Facebook’s, and it still has 40 million users. Connect.me signed up 40,000 followers via Twitter without a product.

Question of the week

How can a consumer startup build an audience?
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Real-Time Advertising: How to Get in Early October 18, 2010

Posted by David Card in Uncategorized.
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Even if you don’t believe real-time feeds will become the dominant content consumption paradigm, it’s clear they’re a growing force. Consumer-paid access to real-time feeds is largely constrained to paid mobile apps today, so advertising would appear to be the immediate payoff. With that in mind, let’s look at how social media companies can best cash in.

I haven’t come across a forecast for real-time advertising spending, but it’s a nascent market that’s fairly concentrated: Facebook and Twitter represent the largest audiences. Market researcher eMarketer projects Facebook will collect $1.3 billion in ad revenues globally in 2010; presumably, most of that will be spent on Facebook’s news feed. Twitter is only just beginning to embrace advertising. But clearly, we’re talking about a business that will be measured in billions rather than millions of dollars.

The current audience concentration — and the resulting ad dollars — could diffuse. Already, a lot of tweets get viewed on third-party Twitter clients, as well as on Facebook. Somewhat similarly, Facebook is syndicating its content through initiatives like Facebook Connect and Instant Personalization, as well as arrangements that allow companies like Skype to show Facebook users’ updates and presence within its own application. So it might not be just Facebook and Twitter who can cash in on those audiences.

Could Real-Time Ad Networks Jump-Start Spending?

Advertisers demand a certain scale of audience before they start spending big money. As with other media — social or otherwise — ad networks can alleviate audience fragmentation, giving advertisers access to eyeballs across a number of sites or apps. The big ad networks from AOL, Google, Microsoft or Yahoo aren’t doing anything in the real-time space. Meanwhile, a handful of startups have emerged. That includes 140 Proof and OneRiot, who sell inventory on Twitter clients and apps, as well as Tweetup, which also makes its own destination site. Ad.ly will construct celebrity-sponsored updates and insert them in Twitter and Facebook streams.

I spent some time with OneRiot this week; its experiences are good indicators of the state of the real-time ad marketplace:

  • Tapping test budgets. OneRiot’s business is divided evenly between publishers (New York Times, ESPN, Guardian) who are promoting its stories or marketing their apps in feeds and more traditional marketers like Zappos and Stella Artois. OneRiot is getting part of the test budget of bigger campaigns, so advertisers are only spending tens of thousands of dollars with it. The company can charge 12 to 25 cents for click-throughs, or $2 to $3 CPMs.
  • Relatively simple targeting. OneRiot usually sells an audience type rather than target by demographic or content context. Its analysis shows that Twitter client users are a highly engaged audience; when they click through to a story or site, they’re likely to hang around twice as long, generating 7 or 8 pageviews.
  • Ad format experiments. OneRiot serves up text ads that look like search engine marketing, but its architecture can handle banners and richer formats. It says some advertisers have experimented with dynamic content that is contextually related and inserted into the text creative.

Ad Network Realities

Right now, the ad networks in real-time are ahead of most of the feed sites in sophistication, and could help move the market forward. But in most media markets, it’s the company with the eyeballs that commands the vast majority of ad spending. Not long ago, observers who probably over-interpreted Google’s success thought online ad networks could reverse this. But that hasn’t turned out to be the case.

Publishers and other content companies like to hold onto the best ad inventory and sell it directly to their best advertisers and ad agency clients. That leaves low-priced remnant inventory for the networks. NBC dropped Google’s TV ad network recently; Microsoft is shutting down its in-game ad network because its biggest customer, Electronic Arts, pulled the business in-house.

As with other media, the real-time ad network ecosystem will have to deliver targeting and measurement to capture advertiser spending. Companies like Klout and Gravity may help marketers identify influencer audiences. Kantar Media, a unit of ad agency holding company WPP, tracks offers competitive intelligence on ad networks, but hasn’t aimed at the real-time space yet.

Related Research: Social Media in the Enterprise

Question of the week

Could ad networks accelerate real-time advertising?

How to Measure Social Media Advertising September 27, 2010

Posted by David Card in Uncategorized.
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Recent stories about social networking companies and third-party data suppliers highlight a key challenge currently facing social media: advertising measurement. Facebook cut some beta features out of its measurement tools for advertisers; Twitter said it would offer an analytics dashboard for the first time. Meanwhile, traffic tracker comScore introduced a new social media monitoring service and news leaked about a new metric from Nielsen.

Companies that best address the social advertising measurement challenge will be the ones to get more of what eMarketer says will be $2.1 billion in U.S. spending next year. How? Opportunistic suppliers will thrive by better measuring the unique characteristics of this new advertising medium and translating those metrics into ones that complement traditional media-buying.

What Social Media Adds to Advertising Analysis

In traditional media, day-to-day brand advertising measurement is about tracking efficiency in buying ad space. Advertisers usually measure brand objectives like increased preference or loyalty after the fact. And they tend to do marketing mix modeling — comparing the effect of different media on sales as well as brand objectives — rarely, due to cost and complexity.

Social media experiences, on the other hand, lend themselves to brand advertising rather than direct marketing techniques. Most advertisers use ads on social networks to raise awareness and consideration, rather than for direct conversion to sales.

And while most traditional advertising measurement concepts are applicable to social media — demographics, reach, frequency, duration, brand “halo effects,” etc. — there are three things truly unique to social media advertising:

  • Explicit preference. Whether it’s Facebook Likes or Twitter followers, social media properties offer marketers the chance to observe users’ self-professed preferences rather than relying on implied or survey-determined preference, or on actual purchase behavior.
  • Advocacy and pass-along. Beyond preference, social media enables consumers to post reviews and recommendations and act as influencers for advertisers. Of course, viral word-of-mouth exists offline, but social media greases the wheels and accelerates it.
  • Real-time feedback. Social media enables marketers and brands to take the pulse of their customers and prospects in real-time, where traditional media has to rely on slower market research techniques.

Social media marketers waste a lot of time debating “engagement.” Some studies hint that marketing messages experienced on social networks engender better recall or brand affinity than those in other forms of media. But that idea doesn’t differ much from what happens in traditional media, where advertisers choose which magazine or TV show runs their spot for context as well as audience type.

Where’s the Opportunity?

Marketers can get some of those traditional and social metrics mentioned above from the social media companies where they happen, e.g., Facebook, Twitter, YouTube, Foursquare, etc. But agencies and third-party tools like Google Analytics, Nielsen Buzzmetrics, WPP’s Cymfony, Radian6 and others do a better job at aggregation and comparison. Social media properties that support and integrate those third-party tools will get more than their fair share of ad dollars, particularly if they can help agencies demonstrate those three aforementioned social attributes for campaigns and long-term marketing programs.

What’s lacking that social media players and measurement companies need to provide?

  • Benchmarks. Companies can track their own progress in achieving effective advertising. But advertisers would loosen their purse-strings faster if there were standard measures for things like how often a social user should see an ad before it becomes ineffective or the value of a follower versus that of a casual visitor. Case studies will have to suffice for the moment.
  • Currency. Likewise, there’s no single ratings currency online — let alone in social media — to fill the role of Nielsen ratings for television or ABC circulation data for magazines. Fragmentation remains across Nielsen, comScore, Hitwise and others.
  • Cross-media comparisons. In theory, Nielsen is best positioned to deliver something like a gross ratings point that would be comparable across TV and online, enabling media planners and buyers to compare the efficiency of different properties. But industry inertia, expense, panel inconsistencies and new TV data from set-top boxes have distracted or slowed Nielsen so far.

Related Research: Multiple Models for Social Media Businesses

Question of the week

What’s missing in social media measurement?